New Directive Poised To Reshape Risk Management, Compliance, & Lending Practices Across The Financial Services Industry
President Trump’s Executive Order (EO), Restoring Integrity To America’s Financial System, signed on May 19, 2026, marks a significant policy shift aimed at strengthening the integrity of America’s financial system. By directing federal financial regulators, including the National Credit Union Administration (NCUA), the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC), to enhance oversight of risks tied to non-work-authorized populations and illicit finance, the order sets clear expectations without immediately mandating new customer data collection.
Financial institutions now face a structured timeline of regulatory actions that will influence BSA/AML programs, credit risk management, and customer due diligence. Keep reading to learn more about this executive order and how your financial institution can prepare.
What The Executive Order Directs
The EO outlines specific deadlines for federal agencies:
- Within 60 days (by July 18, 2026): Treasury will issue a formal Advisory highlighting red flags and suspicious activity typologies, such as payroll tax evasion, shell companies, structuring, labor trafficking proceeds, and the use of an ITIN in place of a Social Security Number as a potential risk indicator. Simultaneously, each functional regulator, including the NCUA, must provide guidance on managing related credit risks. The Consumer Financial Protection Bureau (CFPB) is also expected to address how potential deportation and wage loss may factor into ability-to-repay determinations.
- Within 90 days (by mid-August 2026): Treasury, in consultation with regulators, will propose updates to the Bank Secrecy Act (BSA) implementing regulations to strengthen risk-based Customer Due Diligence (CDD), potentially including authority to collect immigration status when warranted by risk indicators.
- Within 180 days (by mid-November 2026): Regulators will consider changes to the Customer Identification Program (CIP) rules, particularly regarding the acceptance of foreign consular identification cards, such as the Matrícula Consular.
These actions create two primary focus areas: combating illicit finance (terrorism, human trafficking, narcotics, and large-scale money laundering networks) and addressing safety-and-soundness concerns around credit risk.
Scope & Framing: Illicit Finance Meets Credit Risk
The order positions these issues in two lanes. On the BSA/AML side, it highlights substantial risks, including more than $312 billion allegedly laundered through U.S. accounts via Chinese networks and other threats. On the credit side, it raises concerns that lending to individuals who may face deportation creates structural weaknesses in repayment capacity.
While critics argue this approach risks conflating immigration status with criminality and could lead to unintended debanking, financial institutions must prepare for heightened scrutiny regardless of the debate.
What Examiners & Auditors Are Prioritizing
BSA/AML compliance was already a top supervisory focus in 2026. This Executive Order emphasizes that emphasis. The review will include the following key areas.
BSA/AML Program Effectiveness
- Adequacy of CIP and CDD policies, especially handling of ITIN-only accounts, consular IDs, and beneficial ownership.
- Suspicious Activity Report (SAR) filing practices for patterns such as payroll-cycle structuring, off-the-books wages, or funnel accounts.
- Whether AML risk assessments have been updated to reflect the specific typologies in the forthcoming Treasury Advisory.
Credit Risk & Underwriting
- Integration of wage-loss and status-related risks into ability-to-repay analysis once CFPB and NCUA/OCC guidance is issued.
- Portfolio concentration risk in lending to communities that rely heavily on ITINs or alternative identification.
- Stress testing and documentation of decisions.
Fair Lending Considerations
A core challenge is balancing safety-and-soundness directives with ECOA and Fair Housing Act requirements. Institutions must apply any enhanced screening consistently to avoid disparate impact on protected classes, particularly Hispanic and other immigrant communities.
Practical Steps For Financial Institution Leaders
Boards and senior management should treat the next 60–180 days as a critical preparation window. Here’s what proactive institutions are doing:
Immediate Actions (Next 30–60 Days)
- Perform a gap analysis of current BSA/AML and CDD programs against anticipated red flags.
- Inventory exposure: Identify the number of ITIN-based accounts and loans, geographic concentrations, and potential portfolio impacts.
- Initiate board-level discussions on mission alignment, especially for institutions serving diverse or immigrant communities.
Policy & Procedure Updates
- Revise underwriting standards to address ability-to-repay considerations once new guidance is released.
- Strengthen risk assessments to incorporate payroll structuring, third-party processors, and labor trafficking indicators.
- Review acceptance policies for consular IDs and prepare contingency plans, including member/customer communications.
Regulatory Engagement & Risk Management
- Closely monitor releases from Treasury, FinCEN, NCUA, OCC, FDIC, and the CFPB.
- Consult legal counsel on fair lending implications before making significant policy changes.
- Enhance third-party oversight for indirect lending channels that may serve higher-risk populations.
Community & Customer Considerations
Institutions that have built strong relationships in underserved markets should prepare for questions and potential anxiety. Transparent, proactive communication can help maintain trust while demonstrating compliance with evolving requirements. Thorough documentation of policy decisions, whether adjusting practices or maintaining current ones, will be essential for examinations and potential enforcement reviews.
The Road Ahead
This Executive Order is not the final word but the beginning of a regulatory cascade. The real impact will come from the Treasury Advisory, credit risk guidance, and proposed BSA/CDD changes expected over the coming months.
Financial institutions that act decisively (assessing exposure, updating policies thoughtfully, and engaging regulators and counsel) will be best positioned to balance compliance obligations with their service mission. Those who wait risk playing catch-up when examiners begin applying the new standards.
The coming period offers an opportunity to strengthen risk management frameworks while preserving the customer-focused approach that defines many banks and credit unions. Proactive leadership now will help navigate these changes effectively and responsibly. GBQ’s financial institutions team is poised to help you overcome challenges associated with this new EO.
Contact the Financial Services professionals at GBQ Partners today for assistance and proactive positioning.
